Enlightenment Through Understanding

Yet Another Correct Prediction

May 9, 2015

In January 2015, I wrote that falling oil prices would not boost the economy, as so many on the left predicted it would. The left wanted oil to fall to stick it to big oil and big gas, but were disappointed when falling oil and gas prices apparently provided no economic tailwind. Now, sure enough, five months later the Economist has an article that confers with my prediction, Oil be damned:

IN 2014 oil prices crashed. Americans jumped for joy. Small wonder: each year the average American consumes more energy than a Briton and a Japanese person put together. The oil-price drop pleased economists, too. Many were sure that it would give the economy a nice boost. However, the oil bust was followed not by a boom but a slowdown (see chart). Figures released on April 29th showed that growth in the first quarter of this year was just 0.2%. All this leads wonks to wonder: are lower oil prices such a good thing?

I knew this was the case when the stock market & oil prices fell together. If falling oil prices were good for the economy, wouldn’t stocks get a nice boost? But they didn’t.